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By Schmid A.A.

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Custom often results in one-way flow of goods – a transfer or grant rather than two-way exchange (Boulding 1973; Schmid 1973). Status may or may not also carry an emotional element. The grant is non-calculated. It may reside in the sympathy and caring (social capital) one person has for others. Or, a person may act according to a norm without any necessary sympathy. One may make a transfer to another because that person’s welfare is part of the giver’s welfare even if there is no general social norm to make the grant.

When technology changes it changes the outcome of human interdependence under existing institutions and thus may occasion demands for new institutions by some and protection of old advantages by others. Also, we are what we do to a major extent as Marx among others has observed. Technology affects the way we think about the world and our place in it (ideology). Attention to technology is a hallmark of institutional economics and the focus of chapter 10. Time: Time subscripts on all of the above variables are vital.

With feedback, a system evolves rather than settling to an equilibrium. A cumulative effect is achieved if the feedback reinforces and amplifies the original change. This process captures the essence of a large number of phenomena ranging from racial discrimination (Myrdal 1944), increasing returns in the context of economic development (Young 1928) and the relationship of scale and labor productivity (Kaldor 1972), to institutional change and path dependence (North 1990). Consider again the earlier example of interdependence with respect to air quality.

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